The Central Bank begins to publish its “Money Market Review”

The Central Bank of Russia published the first issue of its "Money Market Review" on May 7. We believe that such a review will enhance transparency of the money market and the Bank of Russia monetary policy in general. According to the Central Bank's press release, the better informed are market participants of market structure and trends, the more adequate is their assessment of risks they are exposed to, above all, liquidity risk.

The Review describes key segments of the money market, namely the interbank lending market, foreign currency swap market, and interdealer repo market. Special emphasis is placed on the repo market, because it has a cross-sectoral nature and the Bank of Russia conducts most of its operations providing liquidity to the banking sector in this market.

It is to be recalled that it is the Central Bank's repo operations that have become the principal source of money supply in Russia over the last few years. In this respect, detail analysis of this market becomes an important element of the monetary policy.

A major part of the Review is dedicated to the assessment of systemic risk, systemic relevance of market participants, and the results of stress testing of different market segments. According to the Central Bank of Russia, the currently available amount of security is plenty to meet the commercial banks' needs for liquid resources as part of repo transactions. In addition, the Review underlines that repo transaction discounts are too small for a series of transactions in the interbank lending market, thereby subjecting counterparties to substantial risks in case of market deterioration.

Trunin P.V. - Ph.D. in Economics, Head of Monetary Policy Department